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Domain share price sinks lower on broker downgrade

The market may be pushing notably higher on Monday, but the same cannot be said for the Domain Holdings Australia Ltd (ASX: DHG) share price.

In afternoon trade the property listings company’s shares have sunk 6% lower to $2.85.

Why is the Domain share price sinking lower on Monday?

With no news out of the company, today’s share price decline appears to have been caused by a broker note out of the Macquarie Group Ltd (ASX: MQG) equities desk this morning.

According to the note, the broker has downgraded the company’s shares from a neutral rating to an underperform rating. Macquarie retained its price target of $2.70 on Domain’s shares.

This price target implies potential downside of just over 5% on top of today’s 6% decline.

Macquarie made the move after Domain’s shares charged 23% higher over the last couple of weeks and well beyond its price target.

In addition to this, due to the combination of school holidays, Easter, and Anzac Day, the broker expects activity in April to be notably weak. This could weigh on its second half result.

Macquarie prefers rival REA Group Limited (ASX: REA). It has an overweight rating on its shares and has lifted its price target to $93.50.

Why is the Domain share price up 23% in just two weeks?

The majority of this gain was made last week when Domain’s shares charged 19.5% higher.

Speculation that the property listings company could be a takeover target appears to have been the driver of this strong gain.

And according to the Sydney Morning Herald, there is speculation that a deal could be arranged as soon as the end of the month.

Should you invest?

Whilst I’m with Macquarie on this one, it is worth noting that not all brokers are bearish on Domain.

One broker which is a positive on the company is Morgan Stanley. In February the broker slapped an overweight rating on its shares with a price target of $3.20.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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